Wells Fargo 2014 Annual Report Download - page 250

Note 21: Income Taxes
The components of income tax expense were:
Year ended December 31,
(in millions) 2014 2013 2012
Current:
Federal $ 7,321 4,601 9,141
State and local 520 736 1,198
Foreign 112 91 61
Total current 7,953 5,428 10,400
Deferred:
Federal 2,117 4,457 (1,151)
State and local 224 522 (166)
Foreign 13 (2) 20
Total deferred 2,354 4,977 (1,297)
Total $ 10,307 10,405 9,103
The tax effects of our temporary differences that gave rise to
significant portions of our deferred tax assets and liabilities are
presented in the following table.
December 31,
(in millions) 2014 2013
Deferred tax assets
Allowance for loan losses $ 4,592 5,227
Deferred compensation and employee
benefits 4,608 4,283
Accrued expenses 1,213 1,247
PCI loans 1,935 2,150
Basis difference in investments 382 1,084
Net operating loss and tax credit carry
forwards 631 773
Other 1,318 1,720
Total deferred tax assets 14,679 16,484
Deferred tax assets valuation
allowance (426) (457)
Deferred tax liabilities
Mortgage servicing rights (5,860) (6,657)
Leasing (4,057) (4,274)
Mark to market, net (7,635) (5,761)
Intangible assets (1,494) (1,885)
Net unrealized gains on investment
securities (2,737) (1,155)
Insurance reserves (2,087) (2,068)
Other (1,635) (1,733)
Total deferred tax liabilities (25,505) (23,533)
Net deferred tax liability (1) $ (11,252) (7,506)
(1) Included in accrued expenses and other liabilities.
Deferred taxes related to net unrealized gains (losses) on
investment securities, net unrealized gains (losses) on
derivatives, foreign currency translation, and employee benefit
plan adjustments are recorded in cumulative OCI (see Note 23
(Other Comprehensive Income)). These associated adjustments
decreased OCI by $1.3 billion in 2014.
We have determined that a valuation reserve is required for
2014 in the amount of $426 million predominantly attributable
to deferred tax assets in various state and foreign jurisdictions
where we believe it is more likely than not that these deferred tax
assets will not be realized. In these jurisdictions, carry back
limitations, lack of sources of taxable income, and tax planning
strategy limitations contributed to our conclusion that the
deferred tax assets would not be realizable. We have concluded
that it is more likely than not that the remaining deferred tax
assets will be realized based on our history of earnings, sources
of taxable income in carry back periods, and our ability to
implement tax planning strategies.
At December 31, 2014, we had net operating loss carry
forwards with related deferred tax assets of $631 million. If these
carry forwards are not utilized, they will expire in varying
amounts through 2034.
At December 31, 2014, we had undistributed foreign
earnings of $1.8 billion related to foreign subsidiaries. We intend
to reinvest these earnings indefinitely outside the U.S. and
accordingly have not provided $513 million of income tax
liability on these earnings.
The following table reconciles the statutory federal income
tax expense and rate to the effective income tax expense and
rate. Our effective tax rate is calculated by dividing income tax
expense by income before income tax expense less the net
income from noncontrolling interests.
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